Two days after an unexpectedly weak JOLTS report, and one day ahead of tomorrow’s closely watched April payrolls report, when the US is expected to add just 182K jobs, down from 236K, this morning the BLS reported that in the latest week, the number of initial jobless claims jumped from 229K to 242K, rising above the median estimate of 240K, and the third consecutive month of initial claim prints above 200K (the not seasonally adjusted number rose by a slightly lower 219.6K).

Meanwhile, continuing claims dropped modestly from a downward revised 1.843MM to 1.805MM, but remain near the highest since Dec 2021.

The state by state breakdown showed the while most weekly change prints were in line, New York was once again an odd outlier with an outsized drop of 9,358 in claims.

Meanwhile, earlier in the day, the latest Challenger job cuts report found that in April there were 66,995 job cuts, up 176% Y/Y. So far this year, employers have announced plans to cut 337,411, a 322% increase from the 79,982 cuts announced in the first four months of 2022.  With the exclusion of 2020, this is the highest January-April total since 2009, when 711,100 cuts were announced in the first four months of the year.

As shown in the chart below, the divergence between reported initial claims and challenger continues to be… rather big.

Job cuts announced in the East 17,693; Midwest 14,659; West 29,366; South 5,277.

“Retailers and consumer goods manufacturers are preparing for a tightening in consumer spending, particularly with the Fed’s hike to interest rates in an attempt to control inflation,”  Andrew Challenger, firm’s senior vice president, said in statement.

Retail led all industries in April with 14,689 cuts, up 270% from the 3,970 Retail cuts announced in March. So far this year, Retailers have announced 36,115, an 843% increase from the 3,830 Retail cuts announced in the same period last year. Meanwhile, Consumer Products Manufacturers announced the third-highest number of cuts last month with 9,146 for a total of 19,116. This is a 391% increase from the 3,893 cuts announced through April 2022.

“Retailers and Consumer Goods Manufacturers are preparing for a tightening in consumer spending, particularly with the Fed’s hike to interest rates in an attempt to control inflation,” said Andrew Challenger, labor and workplace expert and Senior Vice President of Challenger, Gray & Christmas, Inc.

The Technology sector announced the second-most cuts in April with 11,553, and leads all industries in cuts this year with 113,944, 34% of all cuts announced in 2023. The year-to-date total is up 24,724% from the 459 cuts announced through April 2022. The silver lining:  April marked the lowest number of layoffs in this sector since October 2022, when 9,587 cuts were announced.

Finally, while job cuts fell in April from March, hiring plans have also fallen significantly from 2022. In April, companies announced plans to add 23,310 positions for a total of 93,948 so far this year. This is down 81% from the 486,603 hiring plans announced in the same period last year. It is the lowest number of announced hiring plans through April since 2016, when Challenger tracked 38,455 hiring plans in the first four months of the year.

Authored by Simon White, Bloomberg macro strategist,

The full force of the rate-hiking cycle is about to be felt across the economy as the Federal Reserve pulls back from warehousing duration risk, leaving the private non-bank sector acutely exposed to higher rates, and credit spreads prone to significant widening.

There has been no shortage of surprises in this cycle. For one, it is remarkable that despite the fastest series of rate hikes for decades, equities are less than 15% off their highs, the VIX is little changed from when the bear market started, and credit spreads are not wider.

But, like a cyclist at the front of a peloton, the Fed has been shielding the economy from the full, and mounting, headwind of higher rates.

Now, though, the central bank, after making perhaps its last hike of the cycle on Wednesday, is pulling to the side and allowing the rest of the economy to face the impact on its own, deepening a recession that may already be underway. Wider credit spreads will be the main adjustment mechanism, as non-bank private-sector balance sheets come under greater stress from rising interest-rate risk.

The Fed’s duration-shedding program – QT – began last summer. As it progressed, it was anticipated that banks would shoulder much of the burden, increasing their ownership of USTs, MBS and other debt securities.

Instead they have also been shedding duration risk, and at an increasing rate. The net effect is that it is the non-bank private sector – corporations and households – absorbing ever more duration, meaning the hitherto dampened effect from rate rises is about to intensify.

The chart below shows the stark difference between the 2008 recession and the state of play today. Back then, both banks and non-banks owned a much larger proportion of debt securities, while the Fed’s QE program was only in its embryonic stages. That recession was one of the longest and deepest seen for many years as the brunt of higher rates, transmitted through wider spreads, was absorbed by the bank and non-bank sectors.

But this time around the Fed and banks are jettisoning duration risk, while corporates and households are becoming increasingly exposed to higher rates, with this exposure accelerating in recent quarters. The vestiges of central-bank protection are fading.

That’s not likely to change any time soon. The Fed has given no hint it intends to curtail QT (although the new BTFP facility can act as a standing buffer if financial stress worsens), and banks look set to keep selling their bonds. The chart below shows that higher Fed rates lead to banks lowering their exposure to debt.

On top of that, the non-bank sector is facing a rapid squeeze in credit availability from banks. As this week has reminded us, lenders have been at the sharp end of the Fed’s rate hikes. That’s especially the case with smaller banks, who loaded up on “safe” assets to meet regulatory constraints, while neglecting to hedge the interest-rate risk properly (as perhaps they forgot rates can actually go significantly above zero).

Credit conditions have been tightening as smaller banks lose deposits, while larger banks are reluctant to take them, meaning high-velocity bank deposits ultimately end up in the lower-velocity world of money-market funds and the RRP.

Smaller banks’ distress should come as little surprise given the yield curve. As long-term lenders and short-term borrowers (while owning fewer interest-paying Fed reserves than larger banks), the degree of the yield curve’s inversion highlights the pressure on smaller banks’ margins.

But the inversion has also allowed the Treasury to increase the duration of its debt, with the result that the average duration of Treasury debt held by the public is now at 20-year highs.

As banks keep selling their UST holdings down, the non-bank public is owning an increasing proportion of this longer-maturity debt, amping up its interest-rate risk even further.

Normally wider credit spreads follow soon after yield-curve flattenings. However, in a clear-cut sign the Fed has been cushioning the economy from the bulk of rate hikes, we have seen one of the deepest yield-curve inversions in over 40 years, while credit spreads have widened only modestly.

But that’s about to change, and spreads will soon begin to reflect the economy’s true duration risk. It’s never fun at the front of the peloton.

Microsoft Corporation’s Chief Economist, Michael Schwarz, stated his primary concern about the swift integration of artificial intelligence in the economy is not the impending wave of job losses but instead bad actors acquiring AI systems for nefarious purposes, according to Bloomberg. 

“I am confident AI will be used by bad actors, and yes, it will cause real damage,” Schwarz said at the World Economic Forum’s Growth Summit 2023 in Geneva, Switzerland. He said, “It can do a lot of damage in the hands of spammers with elections and so on.” 

Schwarz emphasized that AI undeniably requires regulation, but he advised lawmakers to have a “wait-and-see” mindset until the technology causes “real harm.”

“Once we see real harm, we have to ask ourselves the simple question: ‘Can we regulate that in a way where the good things that will be prevented by this regulation are less important?'”

“The principles should be, the benefits from the regulation to our society should be greater than the cost to our society,” the exec said. 

According to Schwarz, Microsoft is constructing safeguards to minimize the potential risks posed by AI tools. The company integrated OpenAI’s ChatGPT into its Bing search function a few months ago, while Google launched Bard chatbot in March.

Any successful AI regulation must exclude AI training sets. He said if regulated, “that would be pretty disastrous. If Congress were to make those decisions about training sets, good luck to us.”

Is the possibility of losing jobs to AI a cause for concern? Michael Schwarz (@Microsoft) suggests that there is a more pressing issue we should be paying attention to instead. #GrowthSummit23 pic.twitter.com/DWMEWp7kjJ

— World Economic Forum (@wef) May 3, 2023

Last month, Elon Musk told Tucker Carlson he had been a longtime advocate of ‘sensible’ AI regulation to ensure companies don’t skip on safety measures, thereby mitigating some harm to the public. He said an agency would need to be created to oversee the technology. 

“I think we have a better chance of advanced AI being beneficial to humanity in that circumstance,” the billionaire said.

Musk warned how AI systems in the hands of bad actors could negatively influence public opinion. 

While industry insiders and lawmakers have the will to regulate AI, the path forward appears difficult because of the ever-changing nature of the technology. And imagine if the technology is used to sway the 2024 presidential elections… 

Authored by Krishna Guha, op-ed via The FT,

The EU has so far escaped the crisis seen in the US but weaknesses mean risks remain…

Europe — with the exception of Switzerland — has had a good banking crisis so far, with no domestic stress. This is not an accident: the EU has done a better job of regulating and supervising its banks than the US. But it would nonetheless be wildly imprudent to assume that some variant of what happened in the US could not happen in Europe.

This means that the European Central Bank — whose rate-setters meet on Thursday — must proceed carefully with its remaining rate rises and it should be a wake-up call to complete banking union.

European banks, like US ones, face large unrealised losses on assets acquired during the period of ultra-low interest rates that fell in value when interest rates shot up. As in America, some losses are on government bonds, but eurozone banks also hold a lot of fixed-rate mortgages.

A bank that made a 20-year fixed-rate loan at a rate of 1.5 per cent will face losses year after year if it has to pay more than half the current ECB deposit rate of 3 per cent for its own funding — even if the loan does not need to be sold and the loss crystallised up front.

Europe is better prepared for this because — unlike their US counterparts who exempted midsized regional banks from certain regulations in 2019 — the EU authorities applied the full set of liquidity and capital regulation across their banking system.

EU supervisors also zeroed in on interest rate risk with stress tests that involve a big rate shock applied broadly to European banks. This helps explain why the bloc has not experienced US-style stress to date.

However, the likelihood that some bank somewhere in the EU ended up badly mismanaging interest rate risk in ways that were missed by its national supervisor must still be quite high.

Moreover, while European supervisors stress tested banks for an interest rate shock (on the asset side of their balance sheets) they did not test for the other half of the stress that hit US regional banks — a simultaneous shock to the stickiness of bank deposits (on the liabilities side).

This shock to stickiness led to deposits fleeing Silicon Valley Bank at a pace eight times the fastest run in the 2008 financial crisis, fatally wounded First Republic and, for a period, destabilised the entire US regional banking system. It was the combination of this shock to stickiness of deposits with the interest rate shock that was novel and dangerous.

We do not really understand the shock to stickiness in the US, nor know how persistent it will be. But the underlying technology shock from mobile internet banking that allows customers to move deposits at the flick of a finger is present in Europe, too.

Moreover, Europe is worse placed to deal with such a twin shock were it to arise. Deposit insurance at €100,000 is too low, and there is no systemic risk exemption of the kind the US authorities invoked to protect all depositors and quell runs, while Europe’s single resolution mechanism for failing banks is too rigid.

And after years of gridlock and failure to complete banking union, there is still no common European deposit insurance fund, raising the risk that a bank crisis could reignite a bank-sovereign “doom loop” with bank losses threatening the solvency of weak governments and deposits fleeing weaker countries to stronger ones.

The ECB is standing behind periphery debt with its new transmission protection instrument, or TPI, bond-buying tool, but this is as yet untested. The failure of European bank stocks to rebound fully is telling us that risks remain. Even without domestic stress, banks will be less profitable with higher funding costs and — as the new ECB bank lending survey shows — they will tighten credit further.

With core inflation elevated, the ECB does still need to edge rates a bit higher, or risk a loss of inflation credibility and a spike in long-term interest rates that could ignite a bank crisis.

But the central bank will need to proceed very carefully to avoid shocking the system. With additional credit tightening already emerging, this means no return to jumbo-sized half-point rate rises. The ECB should also consider letting banks roll over some of the funding it provides that will soon expire, and avoid reducing its quantitative-easing holdings of sovereign debt too quickly.

EU governments, meanwhile, should view the US stress as cause to get serious about finishing the banking union before — not after — they too face a bank crisis.

*  *  *

The author is vice-chair of Evercore ISI and a former member of the management committee of the New York Fed

Authored by Simon Watkins via OilPrice.com,

• OPEC has repeatedly warned of the danger of undermining oil industry investment and has cut production to ensure oil prices remain higher.

• Meanwhile, the United States has rigorously attempted to keep oil prices lower in order to keep fuel prices down and protect against inflation.

• At the same time, Russia is fighting to take market share from OPEC producers by helping to push prices higher while selling its oil at a significant discount.

The recent comment by the Secretary General of the Organization of Petroleum Exporting Countries (OPEC), Haitham Al Ghais, that the International Energy Agency (IEA) should be “very careful about further undermining” oil industry investments highlights the ongoing war between the big net buyers of oil allied to the U.S., and big net sellers of oil in the OPEC grouping. Contemporaneous news that Russia has slashed OPEC’s share of one of the biggest global buyers of oil, India, to the lowest in over two decades also illustrates Russia’s position in the new global oil market order, as analyzed in my new book on the subject.  

Al Ghais’s comment is right in and of itself – the transition from fossil fuels to cleaner energy does need to be carefully managed to ensure no disruption to ongoing global power supplies, and this requires investment. However, the implication in his later comments that oil prices must be above US$80 per barrel (pb) of Brent to allow for such investment is wrong. In many of the leading oil-producing countries of OPEC – Saudi Arabia, Iraq, and Iran – the ‘lifting cost’ (the price of extracting one barrel of oil from the ground, not including capital expenditure) is literally just one or two dollars. With genuine capital expenditure added in then this per barrel extraction lifting cost is around six to eight dollars in these countries. Other countries in OPEC have higher figures certainly, but not by much in most of them.  

The difference between the actual cost of taking a barrel of oil out of the ground and US$80 is mostly accounted for in the government budgets of OPEC countries not by investment in energy infrastructure to sustain future supplies but rather by investment in other state-directed projects unconnected to the energy sector.

In Saudi Arabia’s case, vast sums of money flowing into its flagship oil company, Saudi Aramco, have been used for many years as funding for what might be regarded as various vanity projects (Neom, to name but one) and socio-economic projects (creating the King Abdullah University of Science and Technology, among many others). This, along with several other toxic elements attached to Saudi Aramco, was the reason why it could not find a reputable international stock exchange to take its initial public offering (IPO) and why it struggled to find Western investors to buy into the IPO. It is understandable why Saudi Arabia uses its chief revenue source to fund such projects, but to include these as being a true rationale for oil prices to stay above US$80 pb is to conflate two separate issues as far as much of the global oil market is concerned.

On the other side of the oil price equation is the U.S. and its principal economic and security allies both in Europe and Asia. For these countries that are net importers of oil and gas, sustained oil prices above US$80 pb of Brent, and corollary rising gas prices, mean that inflation will remain higher for longer, which will keep interest rates higher for longer, which will increase the economic damage done to them. For the U.S., these fears have very specific ramifications: one economic and one political, as also analyzed in my new book on the new global oil market order. The economic one is that historically every US$10 pb change in the price of crude oil results in a 25-30 cent change in the price of a gallon of gasoline. For every 1 cent that the average price per gallon of gasoline rises, more than US$1 billion per year in consumer spending is lost and the U.S. economy suffers. The political one is that, according to statistics from the U.S.’s National Bureau of Economic Research, since the end of World War I in 2018, the sitting U.S. president has won re-election 11 times out of 11 if the U.S. economy was not in recession within two years of an upcoming election. However, sitting U.S. presidents who went into a re-election campaign with the economy in recession won only one time out of seven. This is not a position sitting President Joe Biden, or the Democratic Party, wants to be in one year out from the next U.S. election. 

These reasons are why the U.S. has long sought to rigorously enforce a price range for the Brent crude oil benchmark of US$40-45 pb on the floor (the price at which U.S. shale oil producers can survive and make decent profits) to US$75-80 pb on the ceiling (the price after which economic threat becomes apparent to the U.S. and its allies, and political threat looms for sitting U.S. presidents). This rigorous enforcement saw its apotheosis under former President, Donald Trump. When Saudi Arabia (with the help of Russia) was pushing oil prices up over the US$80 pb of Brent level in the second half of 2018, Trump sent a clear warning to Riyadh to stop doing this. In a speech before the United Nations General Assembly, the then-President said: “OPEC and OPEC nations are, as usual, ripping off the rest of the world, and I don’t like it. Nobody should like it.” He added: “We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good. We want them to stop raising prices. We want them to start lowering prices and they must contribute substantially to military protection from now on.” In short, during Trump’s entire presidency, the ‘U.S./Trump Oil Price Range’ was breached only once for a period of around three weeks (toward the end of September 2018 to the middle of that October).

So, what about Russia, the significant ‘+’ part in ‘OPEC+’? For many years up to its invasion of Ukraine in February 2022, Russia had a fiscal breakeven price per barrel of Brent of around US$40. This was for a long period about the same as the level at which U.S. shale producers can make decent profits and around half of Saudi Arabia’s longstanding fiscal breakeven oil price. Things have changed now, with a fiscal breakeven oil price for Russia of around US$115 pb of Brent this year, according to oil industry figures. But this is not the key point. The key point is that following Russia’s invasion of Ukraine, various bans and price caps were introduced on its hydrocarbons products by differing groups of the U.S. and its allies, with a central one being the introduction of a general oil price cap on Russian oil at US$60 per barrel. This came in December from the G7 group of countries (comprising Canada, France, Germany, Italy, Japan, the UK, and the US) and from the EU (which is also a ‘non-enumerated’ additional member of the G7), plus Australia.

Given these factors, then, Russia’s strategy has been very straightforward, but very effective: persuade Saudi Arabia (the de facto leader of OPEC) to increase the group’s oil prices as much as possible while at the same time selling its own oil at a discount to this price, above the official oil price cap. There are plenty of willing buyers for discounted Russian oil whether it is at or above the US$60 pb barrel price cap. China is the main one, but India is a huge buyer too – and the higher OPEC puts up its oil prices, the more attractive discounted Russian oil looks. As also analyzed in my new book on the new global oil market order, neither China nor India (nor several other major oil-buying countries) care at all about existing U.S.-led sanctions against Russia and are happy to buy cheap Russian oil. Interestingly as well, the U.S. itself does not seem too bothered about such sales at discounted prices to the OPEC levels because this has the net effect of subduing oil prices generally within the wider global oil market. 

The extent of the success of Russia in duping Saudi Arabia and OPEC into pricing themselves out of key buying markets and allowing Russia to exploit that gap can be seen in the latest figures for India’s oil buying. According to the latest industry figures, OPEC members saw their share of India’s oil market slide to 59% in the fiscal year to March 2023, from about 72% in 2021/22. Russia overtook Iraq for the first time to emerge as the top oil supplier to India, pushing Saudi Arabia down to number three in the latest data. 

Police in Europe and South America coordinated to arrest over 100 people Wednesday in a wave of raids on the ‘ndrangheta, a notorious Italian crime group that’s arguably the world’s well funded.

In total, 132 people were arrested across 10 countries in an operation that involved 2,770 officers, according to NBC News, citing the international policing agency of the European Union.

“Members of one of the world’s most powerful criminal networks have been taken into custody,” said Europol, which referred to the Wednesday operation as the “largest-ever coordinated hit” against the crime group.

“The mafia-style organization is responsible for much of Europe’s cocaine trade, combined with systematic money laundering, bribery, and violence,” the statement continues.

The Carabinieri, a branch of Italian law enforcement, said it arrested 108 people on charges including international drug trafficking, money laundering and weapons possession.

Arrests were also carried out in Germany, Belgium, France, Portugal, Romania and Spain, as well as in Brazil and Panama. -NBC News

Of note, officers in Munich raided a car wash that was being used as a front for mafia activity.

Some 500 officers took part in raids in the state of Rhineland-Palatinate in western Germany. Another 500 emergency services personnel were involved in searching 51 addresses in neighboring North Rhine-Westphalia to the north.

An unnamed 47-year-old man was arrested in the city of Saarbrücken, Germany’s southern border with France, in an operation involving 30 special police units and riot police. Both his house and business premises were searched, prosecutors said. -NBC News

In recent years, authorities have ramped up action against the ‘ndrangheta – putting some 350 suspects on trial in 2021 using a specially-built courthouse in the Calabria region. Over 15,000 pages of evidence were submitted in the trial.

In February, a ‘ndranghetha hit man, 63-year-old Edgardo Greco who had been on the run for 16 years, only to be arrested in France where he had been working as a pizza chef.

Greco was convicted of killing two people in the early 90’s and sentenced to life in prison. The pair were beaten to death with a metal bar in a fish shop in Calabria. He’s also accused of attempted murder in a separate case.

And in January, Italian police arrested the most wanted man in the country, mafia boss Matteo Messina Denaro, a fugitive of more than 30 years, and the suspected leader of the Cosa Nostra crime group.

The investigation that prompted Wednesday’s arrests centered on several powerful San Luca, Calabria-based families, which Europol said have been waging an interfamily feud for years, leading to fatal shootings in Italy and Germany.

The crime group was responsible for trafficking drugs from South America to Europe, the agency said, as well as smuggling guns from Pakistan to South America. -NBC News

According to Europol, the investigation also uncovered “extensive global money laundering system, with massive investments in Belgium, Germany, Italy, Portugal, Argentina, Uruguay and Brazil.”

Items seized in the raids include gold bars, handguns, assault rifles and stacks of cash.

Authored by Dave DeCamp via AntiWar.com,

The US and Finland are working out a deal that would allow the US to establish a military presence in the Nordic country, as Helsinki is now a member of NATO.

According to Newsweek, Finnish Foreign Ministry official Mikael Antell confirmed the two nations are negotiating a Defense Cooperation Agreement that may allow for the construction of significant military infrastructure on Finnish soil.

The potential agreement would not include nuclear weapons, although Finnish officials have previously not ruled out hosting nukes. The US has nuclear weapons stationed in five NATO countries under the alliance’s nuclear sharing program but not in any nations that became members after the end of the Cold War.

Antell said the potential DCA “enables troops to enter the country, stay on the ground, the pre-storage of material and possible infrastructure investments through the funds granted by the US Congress to the Pentagon.”

The US and Finland have been in talks on the DCA since last fall, and discussions on the deal took place in Helsinki last week.

“The agreement also defines the facilities and areas where the cooperation would be focused,” Antell said. “They are basically military areas and garrisons. In principle, there can be more than one, but the discussions are still open in this regard.”

Finland shares an over 800-mile border with Russia, and its ascension into NATO means the region will become further militarized. Moscow has plans to beef up its military presence near the border in western Russia and has said it will take more steps to respond to the expansion of NATO infrastructure in Finland.

Authored by Michael Bonner via The Epoch Times,

The following is a commentary by Michael Bonner on his new book, “In Defense of Civilization: How Our Past Can Renew Our Present.”

Do we live in a civilization?

When I was growing up in the 1990s, amidst all the exuberance of the American unipolar moment, I certainly thought I lived in a civilization, and an advanced one at that.

The mood of the time was captured in the near-universal misunderstanding of Francis Fukuyama’s thesis about the “end of history,” as well as in the Disney cartoon “Aladdin.” Both “Aladdin” and Fukuyama invited us to imagine “a whole new world,” and both did so coincidentally in 1992. Nothing, it seemed, could halt the steady progress of a new age of peace, stability, wealth, and freedom.

But, in the West, so much seems to have gone wrong since that moment.

Disaster in Iraq, Rwanda, and the Balkans should have disturbed western complacency, but didn’t. Neither did the damage done by neoliberal economics, hyper-globalization, outsourcing, and the de-industrialization of the West.

The 1990s also saw the rise of the Taliban, and the following century opened with the destruction of the Buddhas of Bamiyan in Afghanistan and the attacks of 9/11 in America. Since then we seem to have lurched from one crisis to another: warfare and humiliation in the Middle East, the failure to export liberal democracy abroad, financial collapse, terrorism, and latterly the pandemic, supply chain problems, inflation, and renewed warfare in Europe.

All this is to say that the “whole new world” we were promised in the ’90s is much like the old one, only worse. And the theory of irreversible progress seems increasingly implausible in the face of steady decline.

But this doesn’t mean that there’s nothing we can do.

Decline isn’t irreversible either. If that were true, then human civilization would never have recovered from its first collapse thousands of years ago. Renewal is possible even after a long interval, as is shown, for example, by the revival of Europe after the collapse of the Roman Empire, or the ebb and flow of civilization in Egypt, Mesopotamia, or China despite repeated foreign conquest. So no matter how bad things may seem, civilization can recover.

But how would we bring about this renewal? The modern answer centres on innovation: doing something revolutionary and starting over again. Most of us now living in the West are used to thinking of practically all aspects of life in the same way that we think of technology. One technological change supersedes another, and each change rapidly ushers in another one. The same process supposedly governs social and moral development. This mode of thought passes without question now. But it would have seemed very disagreeable to a peasant who lived through the French Revolution, a Ukrainian farmer enduring Stalin’s five-year plans, or an indigenous inhabitant of the New World whose life was upended after the arrival of Europeans.

The Western obsession with sweeping away the past is highly peculiar, of course, and it is also highly destructive.

In contrast, all the great recoveries—whether successive Egyptian or Chinese dynasties, the European Renaissance, or the Islamic Golden Age—were inspired by imitating older cultural models. Even the so-called Scientific Revolution involved Copernicus and Galileo revisiting Byzantine and Perso-Arabic theories of physics and astronomy. Greek philosophy and mathematics owed a huge debt to far older Near-Eastern models salvaged from the Late Bronze Age Collapse around 1177 BC. And Confucius claimed to be a mere transmitter of the customs and values of the ancient Zhou state founded in 1046 BC.

The Western obsession with revolutionary change and novelty grew out of the Age of Discovery, matured throughout the Reformation and Enlightenment, and ossified into an ideology in the early 20th century. The ideological part was the work of Italian poet and art critic Filippo Tommaso Marinetti, whose “Futurist Manifesto” appeared in 1909.

(L-R) Italian futurists Luigi Russolo, Carlo Carrà, Filippo Tommaso Marinetti, Umberto Boccioni, and Gino Severini in front of Le Figaro, Paris, on Feb. 9 1912. Marinetti, author of the “Futurist Manifesto,” urged the total repudiation and destruction of the past. (Public Domain)

Marinetti urged the total repudiation of the past and the rapid acceleration of technological and social changes. He worshiped the alleged beauty of speed. He hated museums, praised war as a form of hygiene, and wanted to see ancient cities utterly destroyed.

The “Futurist Manifesto” crystallized trends that are still with us. The informal motto of Silicon Valley is “move fast and break things.” Elon Musk, Richard Branson, and Jeff Bezos, for instance, could be considered Futurist prophets of fast cars, trains, rocket ships, high-speed downloads, and near-instantaneous deliveries. Tech companies and CEOs still speak of accelerating change, and the constant action and insomnia favoured by Marinetti are the virtues of the modern office worker.

Futurism could be considered the Mother of All Ideologies.

In Italy, the Futurists turned Fascist. They were Bolsheviks in Russia, and Nazis elsewhere. They all agreed with Marinetti’s vision: progress meant repudiating and destroying the past. In the fascist utopia, the state would serve only the strong. Communism would usher in the dictatorship of the proletariat. Nazism reimagined the Marxist class struggle as a conflict among races, and envisioned the end point of history as the thousand-year Reich. These Golden Ages all lay ahead, owing nothing to history. And, as Marinetti seemed to foresee, they would take shape amidst obscene destruction and murder.

Thus the most horrific disasters in human history have a common origin not in the veneration of the past, as some believe, but in utopian visions of the future. So why, we might ask, is future-orientation still such a powerful idea? And if looking to the future is so bad, what should we do instead?

This is what my book “In Defense of Civilization: How Our Past Can Renew Our Present” is about. It attempts to explain what makes human civilization what it is. It shows what we are in danger of losing through decline or collapse, and points the way toward renewal. The book argues that civilized life itself arose because our ancient ancestors developed a connection with the past and felt that they had a place in history—a feeling that we are now very close to losing. And it asserts that every former renewal of civilization has been inspired by memory of the past and a deliberate effort to imitate it.

Despite the uncertainties and tensions of contemporary life, and the perception of decline, we should remind ourselves that the future we think we want is never the future we actually get. But, if we want it to, civilization will outlast our failures.

The “Godfather of AI” resigned from his position at Google, where he has worked for over a decade. He joined a growing chorus of critics who warn of the existential risk artificial intelligence systems pose to humans. 

On Monday, Google computer scientist Geoffrey Hinton tweeted:

“In the NYT today, Cade Metz implies that I left Google so that I could criticize Google. Actually, I left so that I could talk about the dangers of AI without considering how this impacts Google. Google has acted very responsibly.”

In the NYT today, Cade Metz implies that I left Google so that I could criticize Google. Actually, I left so that I could talk about the dangers of AI without considering how this impacts Google. Google has acted very responsibly.

— Geoffrey Hinton (@geoffreyhinton) May 1, 2023

In an interview with The New York Times, Hinton said it was only after quitting Google that he could openly talk about the dangers of AI.  

He still believed the systems were inferior to the human brain in some ways but he thought they were eclipsing human intelligence in others. “Maybe what is going on in these systems,” he said, “is actually a lot better than what is going on in the brain.”

As companies improve their AI systems, he believes, they become increasingly dangerous. “Look at how it was five years ago and how it is now,” he said of AI technology. “Take the difference and propagate it forwards. That’s scary.”

Until last year, he said, Google acted as a “proper steward” for the technology, careful not to release something that might cause harm. But now that Microsoft has augmented its Bing search engine with a chatbot — challenging Google’s core business — Google is racing to deploy the same kind of technology. The tech giants are locked in a competition that might be impossible to stop, Dr. Hinton said. -NYT 

One of his most immediate concerns is that the internet will be flooded with fake videos, photos, and news, and the average person will “not be able to know what is true anymore.”

Hinton is concerned that automation will disrupt the job market. Chatbots, like OpenAI’s ChatGPT, can already replace personal assistants, translators, and others who handle routine tasks. 

“It takes away the drudge work,” he said, adding, “It might take away more than that.”

A recent Goldman Sachs research note predicted that AI could lead to some 300 million layoffs among highly paid, non-menial workers in the US and Europe. As Goldman chief economist Jan Hatzius put it:

“Using data on occupational tasks in both the US and Europe, we find that roughly two-thirds of current jobs are exposed to some degree of AI automation, and that generative AI could substitute up to one-fourth of current work. Extrapolating our estimates globally suggests that generative AI could expose the equivalent of 300 million full-time jobs to automation” as up to “two thirds of occupations could be partially automated by AI.”

And on Monday, IBM CEO Arvind Krishna said AI could replace 30% of its back-office jobs over the next five years. 

Back to Hinton, where he continued to warn AI will eventually eclipse human intelligence:

“The idea that this stuff could actually get smarter than people — a few people believed that.

“But most people thought it was way off. And I thought it was way off. I thought it was 30 to 50 years or even longer away. Obviously, I no longer think that.”

He said he didn’t sign the letter in March when more than 1,000 technology leaders, including Elon Musk, Steve Wozniak, and AI pioneer Yoshua Bengio, called for a six-month moratorium on developing new AI tools more powerful than GPT-4. That’s because he didn’t want to openly criticize big tech while working for Google.

In 2018, Hinton and two other colleagues received the Turing Award, or “the Nobel Prize of computing,” for their work on neural networks. Google acquired his company in 2018 for $44 million, which developed powerful technologies that led to the creation of chatbots. 

In a separate interview, Hinton told BBC News, “I’ve come to the conclusion that the kind of intelligence we’re developing is very different from the intelligence we have.” 

“The big difference is that with digital systems, you have many copies of the same set of weights, the same model of the world.

“All these copies can learn separately but share their knowledge instantly. So it’s as if you had 10,000 people and whenever one person learned something, everybody automatically knew it. And that’s how these chatbots can know so much more than any one person.”

One of the most significant risks he sees is authoritarian leaders can use AI technology to “manipulate” the masses. 

Hinton’s concerns may be coming a bit late, as the technology is already in use. Similar concerns have been expressed by engineers and scientists in the past, in relation to nuclear power and biochemistry. It’s inevitable that the world will eventually face an AI-driven crisis.